India To Soon Announce 40nm Semiconductor Fabrication Unit, Multiple Compound Fab Proposals

India is set to announce a semiconductor fabrication unit with a 40nm capacity, along with multiple compound fab proposals, according to Union Minister of State for Electronics and IT Rajeev Chandrasekhar.

Chandrasekhar stated that the chips produced by the fab will be available within two to three years after the announcement.

“We will certainly have, very soon, an announcement of a 40nm silicon fab. We will also have multiple compound fab proposals," Chandrasekhar was quoted as saying by Livemint.

He emphasised that these decisions are long-term, spanning over a decade, and will not be rushed.

"These are not decisions running from election cycle to election cycle. These are decisions for the next decade. We will be in a position this calendar year to take the decision on the 40nm fab, and none of these decisions will be taken in a hurry," he added

However, he did not disclose the names of the companies that have submitted the proposals.

The proposals reportedly come after the government has made changes to its $10 billion financial incentive scheme, increasing its support for the establishment of semiconductor, packaging, testing, and allied fabrication units in the country.

These modifications now allow proposals for mature nodes, including those above 40nm, without imposing a specific deadline.

Vedanta Foxconn Pvt. Ltd has applied under the modified scheme, but they have decided to split up and apply separately.

According to Chandrasekhar, the proposal is likely to stay with Vedanta or be replaced by a fresh one from Vedanta.

He clarified that the legal entity that applied for the scheme remains the same, and any equity changes are not relevant to the proposal.

Vedanta-Foxconn was one of the first three applicants to the original scheme launched in January 2021.

Chandrasekhar said that the proposals from the other two applicants, International Semiconductor Consortium (ISMC) and Singapore's IGSS Ventures, are no longer being considered by the advisory committee.

According to Chandrasekhar, Foxconn has indicated that they will independently submit a proposal.

The Taiwanese contract manufacturer is reportedly in talks with Taiwan Semiconductor Manufacturing Co. Ltd (TSMC) and a few other semiconductor fabricators.

In addition to the above initiatives, the government plans to launch the India Semiconductor Research Centre in a public-private partnership model.

This will involve the modernisation of the Semiconductor Laboratory in Mohali, Punjab, where a research-cum-commercial fab will be established.

The government plans to invest around Rs 10,000 crore in the fab project, and there are discussions about establishing a branch of the research centre in South India.

The Ministry of Electronics and Information Technology (MeitY) will also partner with Invest India to attract investments in the semiconductor industry from Japan, Taiwan, South Korea, Europe, and the US.

This comes as Nivruti Rai, former head of Intel India, has been appointed as the managing director and chief executive officer of Invest India on Wednesday (20 July).

The goal is to position India as an appealing investment destination for semiconductors.

MeitY will also host the Semicon India 2023 event to showcase recent investments in the semiconductor industry, including those made by Micron Technology Inc., a US-based company.

Following Micron's announcement of $825 million investments in its $2.75 billion packaging plant, several proposals for testing and packaging units for compound and silicon semiconductor chips have been submitted to the government, the minister said.

The government is comfortable with not taking equity in the projects financed by the Centre and states as the country is still in the early stages of attracting potential investors and economic incentives are necessary to encourage companies to choose India over other countries, according to the minister.

The government's focus at the moment is on improving the viability and profitability of manufacturing in India.

“We are in the early stages of building an ecosystem. Whether five years from now, we will consider taking equity, subordinated debt at that stage... Today, it is about basically saying we want to improve your viability and make it more effective for you to manufacture in India and be more profitable," the minister said.

With the concentration of semiconductor technology in a few companies and geographies, it is crucial to provide an attractive regime of markets, laws, local regulations, and capital subsidies. This will encourage companies to consider a greenfield approach and invest in India, according to the minister.